October 16, 2023
Will FERC Order 2023 finally break the interconnection backlog?
On July 27, 2023, the Federal Energy Regulatory Commission (FERC) issued Order 2023 on interconnection reforms in an effort to reduce interconnection request backlogs, minimize inefficient processes, and ensure increased transparency for customers.
Interconnection stands as one of the most formidable barriers to entry for electricity markets. With average interconnection wait times at a staggering 5 years in 2022, it is critical that our systems adapt to effectively usher in the clean energy transition and ensure that the corporate community achieves its clean energy and sustainability goals (Utility Dive).
Source: Center on Global Energy Policy at Columbia University SIPA
In a 1,500-page directive, the FERC Order introduces measures to discourage speculative interconnection requests, incentivize timely study completions, and promote information transparency. The interconnection process has historically been computationally exhaustive and informationally limited. This set of reforms intends to get to the crux of the matter by driving best practices and addressing the issue from multiple angles.
The first key element of reform is a first-ready, first-served cluster study process designed to enable a more efficient process and successful outcomes. The Order creates withdrawal penalties to reduce later-stage withdrawals that would otherwise necessitate restudies. The cluster study process involves a single, 45-day queue cluster window with site control, study and commercial readiness deposits, a 10-day cure period, and a 60-day customer engagement window.
To the point of transparency, the results of the study will be reflected in a publicly accessible “heat map,” which will illustrate suitable sites within a transmission territory. Overall, these reforms aim to make the process smoother for all parties involved. The process borrows aspects of existing processes in MISO and PJM, among other regions, but seeks to combine all the best parts into a best practices approach that can be carried out uniformly.
Source: Center on Global Energy Policy at Columbia University SIPA
Another key component of reform centers around increasing flexibility for the customer. The Order follows a one-site, one-request principle, with the notable exemption for co-located facilities. Facilities may assign themselves to the same request for a shared site behind a single interconnection point, given the sharing facilities operate at the same voltage level. The Order also states that adding generating facilities to existing requests cannot be automatically marked as a material modification by transmission providers, with the exception of transmission providers with fuel-based dispatch assumptions and additions of different fuel-type resources.
Additionally, the Order incorporates a bucket of reforms to expedite interconnection queue processing. First, in place of the “reasonable efforts” standard that leaves timelines and deadlines up for interpretation by transmission providers, FERC establishes firm study deadlines with penalties for non-compliance. Penalties range based on study type but are capped at 100% of the associated study deposit. Second, the Order creates a standardized affected system study process to increase consistency and clarity. The process includes standardized timelines, deadlines, clear presentation of results, and queue priority for network upgrade cost allocation.
One final element worth noting pertains to bringing technological advances to the interconnection process. The Order adopts more pragmatic operating assumptions for energy storage based on the facility’s proposed charging behavior. The Order also requires transmission providers to evaluate alternative transmission technologies as part of the cluster study. With a list of eight technologies, transmission providers must evaluate all technologies as network upgrades allow, regardless of an interconnection request from a customer.
It is evident that FERC Order 2023 implements substantial revisions to the current interconnection process, but will these reforms invite immediate changes to the system? Likely not. As some regions, like PJM and MISO, already utilize the cluster study process – possibly the hallmark of the Order – we likely will not see a momentous change in interconnection wait times in those regions. Until multiple regions complete their cluster study processes, it is unclear how measurable the impacts of Order 2023 will be in the near term (Utility Dive).
This notable piece of reform may be the catalyst for a chain of events to drastically alter the interconnection process and broader energy system as we know it today. On August 10, 2023, the U.S. Department of Energy (DOE) proposed a two-year review process for interstate transmission projects on federal land. Under the Coordinated Interagency Transmission Authorizations and Permits (CITAP) Program, the DOE mandates transmission developers to complete an interagency pre-application process before entering the permit review phase. The DOE believes this reform will ensure coordination between agencies, increase efficiency, and accelerate the development of transmission projects.
Despite FERC’s important steps toward ensuring increased efficiency and effectiveness for the interconnection process, this is only one piece of the puzzle. The U.S. will need to dedicate significant efforts to planning for and addressing issues around transmission permitting and siting to reach its clean energy goals. Even if interconnection requests can more quickly pass through the process, workforce development and matching the speed of constructing upgrades to demand will need to be addressed. Without an all-encompassing approach with deeper reforms, the U.S. will not be able to support the growing demand for renewable energy on the grid.
This may sound like a daunting task – it’s certainly easier to describe the problem than to prescribe thoughtful and feasible solutions. Although we undoubtedly have a long road ahead, Order 2023 serves as an important milestone that can propel us forward in this clean energy transition.
